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4 minute read
4 Jun 2021
2:14 pm

Car aftermarket guidelines: The good and the bad of third party servicing


Dealers say consumers servicing their cars at non-franchised dealers are at risk, but the regulations also hold benefits for both consumers and service providers.

ELGIN, ILLINOIS - MARCH 25: Cars sit on the lot at the McGrath Honda dealership on March 25, 2021 in Elgin, Illinois. COVID related plant shutdowns over the past year, computer chip shortages, inclement weather, backups at shipping ports and strong demand have combined to cause shortages of new vehicles at dealerships across the country. . Scott Olson/Getty Images/AFP (Photo by SCOTT OLSON / GETTY IMAGES NORTH AMERICA / Getty Images via AFP)

Consumers face a number of risks if they take their in-warranty vehicle with a service plan to a non-franchised dealership for service or maintenance, the National Automobile Dealers’ Association (Nada) has warned.

However, Nada chair Mark Dommisse has also highlighted a number of positive elements in the final Guidelines for Competition in the South African Automotive Aftermarket, which were published by the Competition Commission in December 2020 and will be implemented from July 1 this year.

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Dommisse believes the guidelines will definitely cause downward pressure on manufacturer parts pricing to the benefit of consumers.

Parts pricing

“That is already happening. All of the OEMs [original equipment manufacturers] are doing an analysis of their top 100 parts and comparing [them] to the so-called alternative part.

The guidelines require OEMs to adopt strategies and develop business models that, among others, allow for independent service providers (ISPs) and historically disadvantaged individuals to undertake service and maintenance while a vehicle is in warranty.

Dommisse said this will lower the high barriers to entry to the vehicle aftermarket sector and facilitate inclusivity and transformation.

“OEMs and their respective dealer networks can now make previously protected technical information and training available outside of in-house programmes, and this ability to develop people and transfer skills is a particularly effective transformation credential.

“It must, however, be managed properly and Nada agrees in principle that the guidelines will achieve this,” he said.

Easier to make informed choices

The guidelines also place responsibility on OEMs to disclose certain information to consumers, such as the price of any pre-included service plan, maintenance plan, extended warranty or scratch-and-dent product, to enable them to make informed choices about the required future maintenance of their vehicles.

Dommisse said that when the guidelines take effect, consumers will be in a position to choose to have their servicing and maintenance work done at a workshop of their choice, including ISPs.

But Dommisse warned that by doing so, consumers will face certain obligations and consequences as set out in the guidelines, such as the possible voiding of parts of the warranty.

Dommisse provided an example of the misinterpretation of the guidelines, when it was incorrectly claimed that motorists can choose their own independent service or repair providers, if they wish to, “without their warranties being voided”.

‘Reckless misrepresentation’ of concern

Automotive business council Naamsa has welcomed the guidelines and stressed they present “positive disruptions” to the industry for which South Africa’s automotive industry is prepared but also noted with concern some reckless and persistent misrepresentation and miscommunication about the impact and implications of the guidelines.

Naamsa CEO Mikel Mabasa last week lashed out at “individuals and irresponsible groups who have made it their preoccupation to make public pronouncements that misrepresent and/or distort the true meaning behind the intent and the spirit of some of the principles within the guidelines in order to advance their narrow selfish commercial interests”.

Dommisse added that any damages to a vehicle as a result of work performed or non-original spare parts fitted by ISPs will be assessed by respective OEMs and either parts of, or the entire warranty can be voided.

Dispute resolution

Brandon Cohen, convener of Nada’s legal and compliance committee, stressed that any disputes will be handled by the Motor Industry Ombudsman of South Africa (MIOSA) and ISPs will need to ensure they are meeting their legal obligations in terms of the Consumer Protection Act.

Cohen highlighted Clause 5.4.6 of the guidelines, which states: “Accordingly, ISPs shall disclose to consumers, in clear and explicit terms, the risk of damage that could arise from the ISP’s work, including Consequential Damage to the Motor Vehicle, which may potentially void certain obligations of the OEM in terms of the Warranty.”

A service plan is a contract between a consumer and the OEM to provide original parts with their warranty contract, he stressed.

Independents can become approved dealers

Dommisse added that if an ISP or any entity wishes to become an approved dealer, the OEM must have fair and transparent selection criteria and if the ISP meets those criteria, then the OEM should approve them.

An OEM is only obliged to approve an application if that ISP meets the full terms, conditions and criteria set out by the OEM, he said.

“This is vital for consumers to understand and is incorporated into the guidelines in order to protect the customer and the integrity of their vehicle,” he said.

Right to Repair SA (R2R) movement vice chair Filum Ho said last year when the final guidelines were published that they mark a major victory for consumers and the automotive industry in South Africa.

“By carrying out initiatives, such as unbundling the service and repair warranty market, we can expect better competition in the market, greater transformation, access, and freedom of choice.

“The measures to ensure greater inclusivity in the market, from the likes of independent and previously disadvantaged repair and service providers, will also go a long way in boosting transformation and access while creating new job opportunities,” he said.

This story first appeared on Moneyweb and has been republished with permission.